Thursday, 18 October 2018

Digital Transformation

I was speaking at a function for business leaders recently when a question regarding what to expect when undertaking a digital transformation project came up. The premise of the question was this individual's company had recently undertaken a project to select and implement a new ERP system, which is often the backbone of a wider digital transformation effort, and this process opened the flood gates to all sorts of issues and problems for them. They were asking how they could have avoided such upheaval. 

My response was essentially that they should have expected some level of upheaval because a successful transformation project should in fact do exactly that, transform the business. A transformation project does not occur in isolation or without change. The old adage of you cannot make scrambled eggs without cracking a few shells applies here. It should engage the whole company and as such will make someone uncomfortable. It will in fact, put many company wide sacred cows under the microscope and force them to be defended. This inspection, of course, is not always welcomed. There are corporate political power plays to protect and existing staff and executive ranks become uncomfortable when decisions they have previously made suddenly are being questioned. As Ray Dalio mentions in his book "Principles", when this level of accountability or investigation occurs:

"people tend to be more defensive than self-critical".

And so it seems as if all manner of problems and issues suddenly appear. But has anything really changed? My premise is no, not much has changed at all. These issues were always
there but they were being hidden by other things. Things like the company culture, corporate politics and the unspoken knowns. It is similar to when you undertake an inventory reduction project or adopt lean principles. When you start work on the improvement it seems like all manner of problems start to occur. This perceived increase in problems is one reason why many of these projects start but don't finish. Executives often say these principles don't work or are not worth the effort. 

Just like the rocks in the river metaphor, when you lower the level of the water (i.e your inventory levels) you expose the rocks (issues and problems). But rather than addressing those issues and making the rocks smaller and turn them into pebbles (attempt to remove the problem) executives will often default to saying this isn't working. When in fact what they are really saying is, we didn't stick with it long enough to reap the real benefits that are possible.

Conflict can actually be one of the most healthy things to happen in your business. I wrote on the power of conflict in this article.

How do you make sure your effort or project isn't overloaded with problems and issues? The steps I feel you should take are:

  • Expect problems and plan for them
  • Realise that good conflict is healthy, facilitate good conflict and remove bad conflict
  • Realise that between the "bad now" and the "good in the future" is a period of "we need to work through this"
  • Have an experienced guide by your side to help you anticipate the problems and provide guidance through the unknown
  • Ask great questions of your digital solutions partner to make sure they are both technically capable and culturally aligned with your vision for the business 
  • Make sure you backfill your best people and assign them to the project (See my article on succession planning)

If you or anyone you know is looking;
  • To improve the way their business operates 
  • To improve the way they leverage their current system
  • To replace their current system
Give me a call for a confidential discussion on the best way to achieve this.

Friday, 14 September 2018

Is Your ERP an Asset?

I was having a discussion with a client recently. We were discussing the importance and value of getting a broad range of people, views and experiences involved in the software design sessions we were running at the time. He expressed some reservations about having so many people involved, and subsequently out of the business, at one time. I explained the reasoning and the benefits to him this way...

I understand that when you see the number of people sitting in the boardroom discussing
how the business currently operates and where improvements could be found, you do the quick calculation of their salaries multiplied by the number of people and by the number of hours we have them engaged in the discussion. I understand this can be a large number. I also understand that not everyone contributes to the discussion as deeply as some others. After doing the quick maths, you are wondering where is the value in incurring all this expense?

So I suggested the following story. When he purchases a new piece of equipment and deploys it in his business, he can quickly see, touch and feel this shiny new asset he has bought. He can quickly see how this asset is contributing to his revenue because there is a tangible link between something he can feel and see and the revenue he sees on his P&L.

However, unlike buying a new piece of equipment, when implementing a new software system appreciating the value is not quite so easy, particularly in the early stages of a software project. You certainly cannot touch and feel it as you can a piece of equipment. The ability of the people using the software system is not seen as such a benefit as seeing a driver sitting in the cabin of the machine when they are operating it. However, just because you cannot touch it, does not make the value of the asset you are building any less valuable to the business. In fact, done correctly, I would argue the asset can be more valuable than that piece of equipment.

The process of building this asset (your new ERP system) can make it more valuable because:
  • the large range of people from different areas of the business all get to see and fully understand the other parts of the business. Something that is often missing from a business operation. When sitting in workshops there is often a realisation of: 
    • what work others actually do.
    • how things actually connect. (You would think the staff of the business actually does know this – however, I am constantly surprised how little some areas of a business understand what other areas do.)
    • the impact of a job half done in one area has one another down the chain.
  • People genuinely see the end-to-end of the business and better understand what role they play in the customer experience.
  • The software often determines the business process you follow and therefore its use has a direct impact on the customer experience.
  • Your individual use of the system and the way in which you have it configured can provide you with a key element of your competitive advantage. Something that often stands the test of time, continues to bring benefits to the business in the long-term and does not depreciate like a piece of machinery does.
The real value of this asset is in a competitive advantage it creates for you through the deep understanding and skill of utilising the asset. Just like a more skilful driver can extract more from the performance of a piece of machinery than another. Essentially it is the same asset but a different skillset using it. So by applying this higher skill level to your software creates the true improvement in the value of your business. As a result of your competitive advantage, you can then often justify higher margins than your competitors.

So the more time you take to allow your staff to learn the working of this new tool, the deeper will be their understanding of the tool and the greater the reward when it is finally deployed and is running your business. Yes it is an investment and yes it can be expensive but when invested wisely, just like any other investment it can generate substantial rewards for your company.

In order to be able to ensure your investment is well placed, the addition of an experienced independent advisor is likewise a well-placed investment. As I noted in a LinkedIn post recently, my best clients are often those who have tried and failed to implement an ERP before or who have been involved in such a project. I have discovered that they fully appreciate the value I bring. Wouldn't it be nice if those doing it for the first time wouldn't make the same mistake first?

If you or anyone you know is looking -
  • to improve the way their business operates 
  • to improve the way they leverage their current ERP system
  • to replace their current ERP system
then give me a call for a confidential discussion on the best way to achieve this.

Wednesday, 8 August 2018

What Waste Exists in Your Supply Chain

The UK luxury brand Burberry was reported to have burned up to $50 million of unsold products in FY 2017/18 and up to $150 million over the past five years. It is doing this to protect their premium brand status rather than selling the products at discounted prices.

They believe by doing so maintains their reputation as a high-end brand because it reduces the number of their products being sold at discounted prices. Business Insider had an article the other day indicating that Under Armour beat second quarter expectations but, "is still sitting on a mountain of unsold inventory, which grew 11% to US$ 1.3 Billion in the most recent quarter". Yes, you read that right, with a B. Business Insider goes on to report that fashion houses, in general, have a troubling issue with unsold inventory naming companies such as; Gap, Ralph Lauren and of course they named Burberry. H&M reported it has UD$ 4.3 Billion worth of unsold inventory.

In responding to the criticism in the press recently, Burberry has responded by saying they have some great environmental initiatives within their supply chain. What I find of greater concern is if they have managed to instil environmental initiatives within the supply chain, why haven’t they inculcated better “Lean” initiatives?

It is clear that Burberry and these other fashion houses are manufacturing more goods than there is actual demand. Otherwise, they wouldn’t be in this position of having to destroy or sit on so many unsold products. In a press statement, a spokesperson for Burberry said the disposal was due to a one-off agreement with Coty for beauty products. However, the five-year write off numbers puts this statement in serious question.

Unfortunately, this practice of destroying products is common in the fashion industry. Cartier, for example, is quoted as having recently destroyed products worth €481 million.

So it surprises me that these companies do not have better systems in place. In this day and age when manufacturing systems and technologies are available to help overcome, or more importantly prevent, this exact problem of overproduction. Systems that will trigger manufacturing activities when a real demand signal is identified rather than generating overproduction as is clearly the case at the moment.

I am also surprised that the boards and company executives have allowed this situation to exist. Perhaps because their margins are at the premium end there has been less pressure to adopt lean practices than in other businesses. More likely, however, is the fact that many companies consider inventory to be cheap. Rarely do you see an organisation report a cost for holding inventory in the P&L. It is not until they have to make a financial write-off, then the real cost of holding this inventory actually surfaces. In my day to day work as a trusted advisor, I am consistently surprised how often I am having the debate with executives over the benefits of instilling good inventory practices into their business.

So many companies either rarely conduct stocktakes or when they do, it is because the auditor or end of year financials require one. The benefits of high inventory turns and accuracy in your inventory numbers is enormous. By simply using real-time data capture systems connected to your system of record, your ERP system, and performing well-structured cycle counting regimes you are 80% of the way to solving this issue.

If I was a shareholder in these companies I would be extremely annoyed to see such waste of resources and capital. These organisations clearly do not have a continual improvement culture. (I have used continual rather than continuous deliberately. If you are not sure why I have done this, call me and I will explain).

It is a common misconception, in my opinion, that lean principles and ERP do not work well together. I believe this to be false, they can work well together. In addition to benefiting from adopting lean manufacturing practices, organisations like these will reap significant benefits from leveraging the power of machine learning capabilities that are becoming available today to help improve their forecasting capabilities.

So with all this in mind, what are the potential lessons in this for you? My thoughts are not groundbreaking, but it is clear they are not widely adopted. The actions I feel you should take are: 

  • Don’t wait for market pressures to force you to review processes. By adopting a continual improvement culture in your company you are constantly looking for and adopting better ways. If this is not pervasive within your company, take steps to make it so. 
  • Fully understand the difference between value adding and non-value adding activities and then apply this understanding to your business processes. 
  • Take an honest review of your business and the process you have adopted and identify the non-value adding activities. Then take proactive action to remove them. 
  • Take steps now, because as the US interest rates position shows, money seems to be getting more expensive every day and will most likely continue to do so. Therefore your inventory won't be as cheap as it has been. 

© David Ogilvie

Saturday, 1 April 2017

Observations from recent trip to Sth East Asia

At the beginning of March, a mate of mine and I headed off to Asia to look at the "Destiny Rescue" projects we had raised money for. I also took the opportunity to conduct some business and hold some key meetings in Singapore. Below are some of my observations:

  • Corruption is so widespread in Asia, we are lucky to live and work in the country and business environment we do. While our system is not perfect, it is substantially better than in some areas of the world.
  • The poverty in some areas was head spinning.
  • There are so many more important issues to deal with than those we see on our nightly news, TV screens and those that our politicians want to discuss. For example, I can't believe the Victorian government is wasting time, energy and money on gender equalling walk signs. Really!!!, is that the most important issue we have ATM?
  • The Hilton Singapore has THE best breakfast I have every experienced. I generally don’t like hotel breakfasts, they are cold despite the kerosene heated bain-mares.
  • The level of success and work competed by the team from Destiny Rescue in Cambodia blew me away. Robert Webber has done an outstanding job in his time as country manager. Also a big Thank You again to Jeremy Sargent who was the GM Breville Australia when he made the decision to donate a large range of kitchen appliances to Destiny Rescue.
  • I was very impressed by the enterprise of the people in Asia. While it is mostly driven by necessity, it is still very impressive. Every house I saw in the country Cambodia had a stall or shop of some sort selling something. There is no doubt the fact there is no social safety net available contributes to this. Australia could do with a little more enterprise spirit demonstrated by they Khmer.
  • There doesn’t appear to be any depression in these countries. No one goes to their shrink here. Perhaps people like Grant Hackett could do with a little of the Khmer spirit—maybe it would help him deal with his demons.
  • Decent coffee is hard to find. However, the Arabica bean isn’t the only bean with flavour.
  • How wonderful the weather in Asia can be. I was expecting a stifling hot, humid and rainy trip. But we had fantastic weather. Early March is a great time to visit.
  • I was reminded how unfair the world can be. Many people strive for equality in this country when the reality is we can strive for equality of opportunity but not status.
  • I was reminded how far behind the rest of the world the Australian Tax system is. I saw that I could purchase a bottle of Bundy rum substantially cheaper overseas than I could in my home city—and I don’t mean from a duty-free store. I mean in a retail supermarket. If the Government doesn’t do something about our tax system soon, there will be a massive exodus of talent from Aust. This would be disastrous for the country.
  • This notion of opportunities outside of Aust seems to go in waves, I recall my father considering this when I was young. An old idea’s time may be approaching again.
  • I learnt that you don’t have to be a Microsft Dynamics 365 user to leverage the Azure capabilities of machine learning. This opens the door for a number of other ERP systems to compete without having to build their own capability.
I sincerely hope you gain some insights from my observations.

Monday, 27 February 2017

Customer Service - anathema of modern day business

I had some experiences recently that reminded me how important your corporate language is. On both occasions the companies involved overused the wording: "We apologise for any inconvenience caused", "Please hold as your call is important to us". Seriously if I hear these again, I think I will explode. They are so overused they have lost any meaning, except that of: "We don't care about you, you are nothing more than a number to us".

Great service stands out. Companies that provide great service have empowered employees, that is they are able to make a decision that will impact their relationship with you. Not simply follow a process or worse still have some technology manage the process. (I had one company recently that their phone was NEVER off engaged. I am certain it was a policy to get everyone to use their website - disgraceful. I called at all hours of the day on all days of the week and EVERY TIME it was engaged, Thanks for nothing "Ticketmaster" )

Things you can do to ensure you don't follow the masses into that ugly melting pot of disgraceful service are:

  • Have a real human speak to the customer
  • Don't make the customer wait 20 min on hold
  • Actually have a phone number that works
  • Allow your customer service team to fix the problem. Don't constrain them with policy
The level of service in this country is diminishing rapidly. This gives your business a greater opportunity to stand out - make sure you take that opportunity by providing outstanding service. It's the best marketing campaign you can ever have. 

P.S. If there are any budding technology start-ups out there; there is a great opportunity to provide a decent concert and sporting ticketing service out there. One that actually takes the word service seriously. The ones we have at the moment are appalling.

Monday, 23 January 2017

CEO Education

ERP vendors have often described to me their prospects as being in a “raw state”—raw in the sense that they are new to the process, haven’t done this before and are expecting some guidance. While having a prospect eager for guidance is great for the vendor, they find themselves in a dichotomy.

On the one hand, by wanting to provide great truthful advice, some vendors can, unfortunately, place their sale at risk when competing vendors tell a contradictory and simpler story. On the other hand, some clients, while needing the advice, view it with a high degree of skepticism, thinking the advice might be manipulated because, “After all, they are just trying to sell me something.”

There is no doubt in my mind that executives contemplating replacing their ERP system should obtain some education in this process before they embark on their journey. It is critical they understand what it takes to get the best from software vendors and to fully understand how they should behave in the relationship, thereby ensuring they have the right resources and budget to ensure success.

Until recently this education has been sadly lacking, leaving executives to their own devices. This is, in my view, a major contributing factor to the very high failure rate of ERP implementations. It is unacceptable that in excess of 85% of them fail in some form or another. What is also unacceptable is the high number of acrimonious relationships between client and vendor. This is a major reason why there is such a high churn rate between vendors. I know some successful Microsoft vendors, for example, who have based their whole growth strategy on picking up unhappy customers from other vendors.

While this is great for them, my view is that these relationships should not get to the point of failure in the first place.  This situation should not exist. There has been a significant level of pain and financial waste to get to that point. We should do something to stop it.

Some education on what is an acceptable expectation for both parties helps to set the stage for success. Unfortunately, this understanding is currently being forged in the heat of battle.

Should this type of education be available before executives commenced their ERP journey and entered into a relationship with a vendor, I firmly believe the number of executives whose careers are put at risk due to failed implementations would be dramatically reduced, and the success rate of implementations could be in the 80 percentile rather than the failure rate being at this level.

For this reason, I have developed two workshops designed specifically to help executives select the right product in the first place and to show them how to successfully implement their ERP.

For more information on my workshops, contact me on: and have “Workshop” in the subject line.

Thursday, 5 January 2017

Microsoft Dynamics 365

Firstly, Happy New Year to everyone. I sincerely hope the Christmas and New Year break was an enjoyable one for you.

I was catching up on some emails & checking my Twitter account this morning when I noticed this posting from a company asking "should you (being your company) upgrade to Dynamics 365 or stay with your current version of AX".

Some quick background for those not in the Microsoft eco-system. Microsoft has recently released their latest cloud ERP offering to the market and called it Dynamics 365. It is a combination of a number of their existing products such as CRM, NAV and AX. They have renamed the AX product as operations in the new version.

Back to this morning... I followed this link and was presented with a questionnaire that was supposed to provide me with guidance on whether an upgrade to the new version was suitable for me or not. I completed this form and surprise surprise, it recommended I consider upgrading. This was in spite of one of my answers indicating I preferred an on-premise solution. So I answered the questionnaire again, this time with a different set of answers. Surprise surprise, it still recommended I consider upgrading. I did this with a third set and I think you know the result...

Software vendors really don't do themselves any favors with blatant tactics like this. It is clearly not designed to provide the customer with any genuine information about what is in their best interests or not, but simply to generate a sales prospect. It is no wonder that over the years so many organisations have got themselves into trouble with ERP implementations. This poor attitude towards the client has to change. And while not all software vendors are in this category - unfortunately, a large portion of the industry is.

Clients of ERP vendors and those considering changing their systems, really do need independent help to sift through this type of rubbish. Just as a buyer's broker can provide great assistance to those who don't buy cars or real estate regularly, an independent ERP consultant can be worth their weight in gold for those who don't buy or upgrade ERP systems often. (On another point, not only because I am heavier than my Doctor would like me to be, I provide great value to my clients, and so am worth a lot of gold ;-) )